Material themes and management approach

The content of this chapter is an integral part of the Executive Board report as required under EU directive.

Definition Impact Management approach
Health and safety  
Health and safety (zero accidents) of all employees and subcontractors and everyone involved with BAM’s activities, including the general public ‘BAM borrows its employees from their families’, is how BAM expresses its responsibility for everyone who works with and for BAM. There is nothing more important than everyone returning home safely. Health and safety at work contribute to the satisfaction of the employees of the Group and their family members, BAM’s subcontractors, its supply partners and others involved in BAM’s construction sites. Safety also affects BAM’s clients and BAM’s reputation.   BAM has developed a Group-wide guideline for safety management. All safety management systems from operational companies must comply with this framework. Meeting the strategy means focusing on the quality of the underlying goals: striving for the ambition ‘zero accidents’ every day is the goal for safety. Zero accidents mean the mindset (intrinsic motivation) and the true belief that it is feasible to create a safe working environment that means ‘everyone returns home safe every day’.
For BAM’s performance, see chapter 3.2 Social performance.   
 
Project and product quality and control   
Quality of the tender process, efficient project management and effective project execution with the aim to meet or exceed the expectations of the client. In order to exceed client expectations, BAM must continuously improve the experienced performance of its products. Product quality means that BAM does what it has promised to do, within budget and on time. Operational performance is crucial for achieving the right level of financial and non-financial results for construction projects. BAM has focused the tender process on the quality of its tenders in order to guarantee the current and future results of construction projects. Evaluations of the internal governance framework have resulted in the updating of the business principles and management guidelines, including the strengthening of project selection and BAM’s tender process for large and high-risk projects. In connection with this development, peer reviews are carried out on project estimates under the leadership of the tender desk director. In order to comply with product responsibility, BAM assures that projects where its operating companies are responsible for design and construction are certified. In other projects (PPP projects) BAM uses verification and validation methods. Each operating company has a quality manager who is responsible for the quality control of the operating company’s processes. System audits are conducted by third parties. On all levels, outcomes are assessed by the senior management of BAM’s operating companies.
For BAM’s performance, see chapter 2.2 Strategy and chapter 4 Risk management.
 
Business conduct and transparency
Openness and compliance with generally accepted standards and values and compliance with local legal and other rules and regulations, in particular regarding the acquisition and execution of contracts. BAM’s reputation and licence to operate depend on responsible business conduct, by stimulating dialogue about dilemmas. Ensuring compliance with anticorruption legislation improves efficiency through lower transaction costs for BAM and its stakeholders. Moreover, BAM is of the opinion that doing business honestly is of vital importance for the strengthening of the competitive position of both BAM and its partners. Competitive behaviour contributes to innovation and collaboration. It creates an environment in which the best products will win and in which BAM’s clients will get the best products for the best price. The Group believes that by providing financial and non-financial information on the achievement of BAM’s strategic goals, it can continuously improve the reporting process as well as its performance. For BAM, it is fundamental to comply with generally accepted standards and values but also with local legal and other rules and regulations, particularly with respect to the acquisition and performance of contracts. This is set out in the Group’s core values, the Code of Conduct and adjoining policies such as those relating to bribery, corruption and competition. All employees must act honestly, comply with agreements and deal carefully with customers and business partners, including suppliers and subcontractors. The Executive Board encourages this compliance, which is continuously evaluated in order to make integrity a fundamental part of the daily activities. The Group has an enhanced speak-up policy with an external reporting line, so that breaches of the code and policy can be reported through various channels. This policy is easily accessible to employees (e.g. on the intranet) and there is frequent communication around the themes. Compliance officers monitor compliance and advise on integrity issues.
For BAM’s performance, see chapter 3.2 Social performance.
 
Financial performance
Overall financial health, including balance sheet, profit and loss, property divestment and working capital improvement. A healthy financial performance provides BAM with the means to undertake transactions with its supply chain partners, leading to the possibility to develop new activities and to pay BAM’s employees and shareholders. Constant attention is paid to strengthening BAM’s balance sheet and net results by improving financial processes to ensure a solid track record of project execution and margin stability, including rigorous monitoring of the cost base in line with BAM’s portfolio. Other key elements are working capital management and the execution of a property divestment programme.
Example KPI: Return on capital employed (ROCE) >10 per cent by 2020. For BAM’s performance, see paragraph 3.1 Financial performance.
 
Employee recruitment, development and retention
Energy consumption for BAM’s direct activities and the entire lifecycle of its products, and the CO2 emissions as a result of this energy consumption. The Group’s energy consumption contributes to a significant amount of its costs and is an indicator of the efficiency of its processes. The construction industry has a high energy consumption compared to others; therefore, BAM’s energy use has a major impact on society. Climate adaptation and mitigation options can help address climate change, but no single option is sufficient by itself. Effective implementation depends on policies and cooperation from governmental bodies. Urgent action is needed to significantly reduce greenhouse gas emissions and BAM supports global developments like the UN’s Sustainable Development Goals, the Paris Agreement, the EU Emissions Trading System and the Science Based Target Initiative.

BAM innovates and works with value chain partners to identify possible reductions in both upstream and downstream manufacturing and operational processes. BAM has calculated its carbon footprint in order to identify the main influences and therefore the key areas for potential reduction of emissions. The Group has set targets for both absolute and relative reduction of emissions. BAM monitors and benchmarks progress on these targets on a quarterly basis for different activities within the Company. The Company focuses on reducing its direct CO2 emissions by lowering energy consumption during the construction process. The Group also maintains its efforts to use higher proportions of renewable energy. By joining the Dutch Climate Coalition (Nederlandse Klimaat Coalitie), BAM has committed to:

  • Having climate-neutral operations by 2050;
  • Providing insights into its carbon footprint;
  • Setting interim targets for climate neutrality;
  • Becoming an ambassador of the Dutch Climate Coalition within the construction industry.
Example KPI: CO2 intensity For BAM’s performance, see paragraph 3.3 Environmental performance.
     
Circular economy
An economy which aims to keep materials, components and products at their highest utility and value, at all times. BAM has a continuous need for raw materials, water and energy. This means that primary processes are influenced by the increasing volatility of raw materials and energy prices. The products made by the Group must also comply with current and future requirements, with particular attention to the significant influence of changing laws and regulations. Waste production influences BAM’s licence to operate and is an indicator of the efficiency of the business processes. In addition, waste products lead to costs due to the low value of residual material. Approximately 25-30 per cent of the total demolition and construction waste in the European Union is generated by the construction process. BAM being a large construction company, its waste production has an impact on society. BAM has identified opportunities for innovation based on changing customer requests, especially regarding greater attention for the recycling of materials and the use of sustainable materials, including timber from sustainable forests. BAM is innovating to reduce material consumption during the design process. The Group works with its supply chain partners to identify more sustainable alternatives for production and operational processes, both upstream and downstream. BAM focuses on improving the recycling potential of materials and renewable materials by asking its most important suppliers to provide insight into their origin. BAM has set targets for waste reduction, waste recycling and responsible sourcing. The Group monitors and benchmarks progress on these targets on a quarterly basis for various activities within the Company.
Example KPI: source 100 per cent sustainable timber by 2020. For BAM’s performance, see paragraph 3.3 Environmental performance.
     
Community engagement
The relationships with the communities surrounding BAM’s activities. By its very nature, the Group’s construction and renovation work has an impact on the local community, residents and other users of buildings and infrastructure, and society as a whole. Community engagement affects the Group’s licence to operate and enables BAM to build faster, leading directly to results. The Group’s impact on its surroundings immediately affects its employees and local suppliers. And BAM’s community engagement improves jobs and education in its environment, contributing to society as well. This requires a constant focus on everything BAM does to minimise the Group’s negative impact and create value for local communities by implementing community engagement programmes. Involvement of people from diverse backgrounds provides an opportunity to create social value. BAM actively supports social return, providing work for people who are unemployed for various reasons, for example due to poor education, health issues and people with disabilities. Through the support of BAM, these people benefit from ‘social return on investment’ initiatives. For many of its projects, BAM identifies local interests and, on that basis, chooses the best approach to increase the license to operate, which may mean that BAM participates in local events. BAM also participates in the Considerate Constructors Scheme in the United Kingdom and its Dutch equivalent Bewuste Bouwers.
Example KPI: Enhance one million lives in local communities by 2020. For BAM’s performance, see chapter 3.2 Social performance.
     
Innovation
The creation of new viable business offerings. Innovation influences BAM’s ability to adapt to changing market needs and competitiveness in relation to current competition and future newcomers to the market. Digital construction is a main theme within BAM’s innovation agenda. The benefits of digital construction for BAM and its stakeholders are higher resource productivity, end-user value, sustainability and outcome predictability.

BAM shapes its future portfolio over two tracks. Both tracks are supported by an organisation and a lively ecosystem for innovation (BAMs Innovation Funnel). In both tracks BAM focuses strongly on digital innovation.

  • Track one, ‘Business innovation’, follows an innovation stage gate process to improve and align BAM’s current innovation portfolio.
  • Track two, ‘Scaling edges’, uses scalable learning and sprint methodology to develop and scale new business offerings at the edges of BAM’s current business.
For BAM’s performance, see chapter 2.2 Strategy.
     
Procurement strategy
Selecting suppliers and subcontractors and stimulating them to practise their skills and improve their products in a way that adds long-term value to BAM and its clients as well as suppliers and subcontractors, providing process and product innovation and profit Labour policies of the Group’s suppliers and subcontractors can affect BAM’s reputation. Loss of reputation can lead to less work. The suppliers and subcontractors of the Group must at least adapt their policies to the BAM standards in order to be able to work for the Company. As a result, these standards also have a positive influence outside the Group. To integrate the development of the Group’s supply chain and its values, BAM strives for added-value, long-term, mutually beneficial relationships with partners that can help to improve the Group’s supply chain. In order to achieve this, BAM is developing selected groups of suppliers and subcontractors on different levels – unit, operating company, country and Group level – within BAM. By having a preferred group of suppliers and subcontractors BAM can further interact with the supply chain on a regular basis, thereby creating the possibility to challenge each other to learn, innovate and improve its joint performance for the client. Based on the level of the relationship, there are different types of suppliers and subcontractors, such as preferred suppliers, partners and co-makers. Based on the challenges in client markets, development in the supply chain and performance of the suppliers and subcontractors, the position and role of the suppliers and subcontractors can change. The challenge is, on the one hand, to select up-front supply chain partners, products and services that really make a difference to the value proposition of BAM, and on the other hand let go of suppliers and subcontractors who do not add value. Apart from a more standardised due diligence, suppliers are assessed against five different themes: safety, quality, total cost, logistics, and engineering and process. If they score below the required level, BAM starts a dialogue to improve their performance. If they are not willing and/or able to improve their performance, they will be excluded from future work with BAM.
For BAM’s performance, see chapter 3.2 Social performance.
     
Fair tax
Compliance to the letter and spirit of tax laws resulting in paying an appropriate amount of tax according to where value is created within the normal course of and being transparent about approach and outcome. Human rights is a relevant subject for BAM and its stakeholders. The value of rights and freedoms of people play an central role in both our direct operations as well as in BAM’s mission to create sustainable environments. Human rights practices within BAM and its supply chain also affect the reputation of the Group and are associated with the risk of losing the license to operate. The risk of violations of human rights as referred to in the framework agreement agreed with the international federation Building and Wood Worker’s International (BWI) are considered highest in some of the countries where BAM International operates in, such as in the Middle East and Africa.

BAM has signed a framework agreement with Building and Wood Worker’s International (BWI), to promote and protect employee rights. By signing the agreement BAM agreed to recognise and respect:

  • The fundamental principles of human rights as defined in the Universal Declaration of Human Rights;
  • The ILO Declaration on Fundamental Principles and Rights at Work;
  • The ILO Conventions in force;
  • The ILO Tripartite Declaration of Principles concerning Multinational Enterprises and Social Policy; and
  • The OECD Guidelines for Multinational Enterprises.

Within the agreement, BAM also endorses the need for fair negotiations with national trade unions and acknowledges that corruption, bribery and anti-competitive behaviour are not acceptable. In the past, regular meetings were held with management representatives from BAM and trade union organisations (including BWI) and social audits on (international) projects were carried out to monitor implementation of the agreement. Due to the winding down of BAM International and BAM not being able to carry out social audits in recent years, the Group will reassess whether this is the best approach to cover human rights going forward.

Subcontractors must comply with labour conditions as stated in BAM’s purchasing conditions. The United Kingdom's Modern Slavery Act 2015 requires all larger companies to prepare a statement of its activities in this area. Both BAM Construct UK and BAM Nuttall have initiated working groups and are working towards developing their approaches.

 For BAM’s performance, see chapter 3.2 Social performance.
     
     

 

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